retirement

Is It a Good Time to Sell and Downsize Your Home?

interior of a house - sell & downsize your home today

Many people blame the baby boomers for the housing shortage in the real estate market. According to stats, baby boomers hold the biggest share of real estate wealth in the U.S. And they do not sell their homes as they grow older.

Recently I have learned that there is approximately $8 trillion worth of home equity locked up in older people’s homes.

Housing experts agree that the baby boomers’ generation is healthier than the previous generations. That is why they do not need to move in with their kids or to a nursing home. Also, they do not want to move because they want to age in place. Most of them like their neighborhoods and their friends.

But with skyrocketing home prices, some people think that now is a good time to sell and downsize your home before the real estate market starts cooling off.

Downsizing can be the right path for many baby boomers who want to cash out their biggest asset and live out their golden years with more money in the bank.

Everyone likes the idea of making a profit by selling a big house and buying a small one. But be careful with this decision because today’s market might present some challenges.

High home prices, low inventory

For a long time, downsizing has been associated with empty nesters living in a big house with no kids.

A popular retirement planning approach is to sell a big house you raised your kids in and then go and buy a smaller less expensive house. The best part of this approach is that you can use all your home equity you accumulated over the years to pay for your life in retirement.

But in recent years, the concept of a smaller house has captured our society. Downsizing has become more attractive for many financial reasons.

Less space means less money, less maintenance, and less hassle overall. And the smaller space the easier it is to furnish and decorate. Also, you can spend the saved money on something more important such as travel, hobbies, and time with the family.

After all, a smaller space has more value not only for your wallet but for your lifestyle.

However, with inflated home prices downsizing is not as affordable or profitable as it was before. If you think about cashing in on your home’s equity and downsizing to something smaller and cheaper, you might meet some challenges.

If you decide to sell now, you will be selling at the top of the market with high home prices and low inventory. But on the flip side, you are going to spend more money for your next purchase even something smaller.

When downsizing you will be looking at the smaller homes with modest square footage. Keep in mind that there are a lot of buyers competing for this kind of purchase. Smaller homes, condos, and townhouses became very popular lately and that often leads to steep bidding wars.

In many cases that smaller home you want to buy may end up being more expensive than you have originally planned.

When you sell and downsize your home do not forget about other expenses such as real estate agent fees, attorney fees, real estate, and capital gain taxes.

Prepare to pay 5 to 6 percent of the purchase price to cover realtor agent fees, which are typically paid by the seller. Add to that an extra 2 to 4 percent of the price to cover attorney fees, transfer taxes, and other expenses called ‘closing costs’.

So, if you sell your home for $750,000, you could end up paying $37,500 in realtor fees and $15,000 minimum in closing costs. Total of $52,500 just to sell your house.

Capital gains tax is another costly part of selling your home. Per IRS rules you do not need to pay capital gains taxes on the sale of your home if the profit is less than $250,000 (for an individual) or less than $500,000 (for a couple). But if your sales proceeds are higher than these numbers you will owe to IRS as much as a 20 percent capital gains tax on the profits.

If you live in a state where homes have appreciated in value significantly over the years, it might cost you a lot in capital gains taxes. For example, after selling your home for $750,000, you will pay to IRS $50,000 capital gains tax on a $250,000 profit.

High mortgage rates

Mortgage rates have increased more than 2.5 percent since the beginning of this year. And if you are planning to finance your new home it will be significantly more expensive than it was a few months ago.

According to Freddie Mac, today’s average mortgage rate is 5.78 percent on a 30-year loan. By comparison, in 2021 a 30-year fixed rate mortgage was only 2.93 percent.

If you have a mortgage on your current home with a low-interest rate and looking to downsize and borrow money for your next home, keep in mind that the rate you can get will be much higher than your existing one.

Unless you want to pay cash for your new home, downsizing might not be worth it financially if you want to apply for a new mortgage.

If you are retired and live on a fixed income, downsizing will give you some significant savings down the road. But you have to compare it with how much interest you will pay over the time of the loan.

With the average interest rate of 5.78 percent on a 30-year loan, you will pay around $443,000 in interest costs on a $400,000 home.

Also, qualifying for a mortgage might be a problem if you are not working. Keep in mind that most of the mortgages are issued and approved based on your income and not on your assets. If you are not working, it will be harder to get financing because you cannot show the constant stream of your income.

Moving cost is growing

We all know that moving is stressful. Sorting through your belongings, packing, and cleaning can be overwhelming. And with high inflation and high gas prices, your moving costs will be expensive.

According to the latest report from the Bureau of Labor Statistics, the annual inflation rate in May 2022 was 8.6 percent. It is the highest level since 1981 as measured by the consumer price index.

In today’s world everything involved in a move will cost you more – movers, truck rentals, supplies, storage, etc. In addition to downsizing your home, you will need to downsize and replace your furniture – replacing a big sofa and club chairs with a smaller couch, a king-size bed with a queen-size bed, or a big dining table with a smaller kitchen-size set.

Do you still want to sell and downsize in today’s market?

There are still many financial reasons to sell and downsize in today’s market. And if you are getting closer to retirement, downsizing can come with lots of benefits.

If you are ready to sell on the top of the market and do not want to wait for the interest rates to settle because you will be paying cash for your next purchase, then go for it. Even with the high-interest rates but low inventory, sellers are still demanding a premium for their homes.

For example, you carry a $100,000 mortgage. If you want to sell your home for $600,000, then downsize to a $350,000 smaller home or condo, you might walk away with a nice profit.

Also, you can buy your next smaller home with cash, without having to take out a mortgage.

You still have to carefully evaluate the market where you buy your smaller home. Look at home prices, the number of listings, competition, and how long most houses sit on the market.

Downsizing your home can help you save a lot of money on housing costs. Today, rising property taxes are a result of higher home values. If you downsize from a $600,000 home to a $350,000 home in the same neighborhood, you will pay fewer taxes overall.

With a smaller home, you will also spend less money on maintenance and repairs, heating and cooling, home improvement, and decorations.

Other alternatives to downsizing

If you do not want to sell in today’s market, there are other alternatives to downsizing if you want to wait for interest rates to settle, and housing inventory to increase in the next few years.

Once you are retired, you can rent your home and move to a rental. It will allow you to avoid the high home prices and high mortgage rates today’s market comes with.

Also, if you need extra cash but do not want to sell your home, you can apply for home equity loans, HELOCs, or consider a reverse mortgage.

There are still many people who would prefer to stay in their homes and retire in place. They want to remain in their neighborhood for life. In this case, homeownership might provide several options to fund your retirement without the risk of stock market investments.

One of the options is a reverse mortgage.

If your home has gained a lot in value, it makes sense to calculate the numbers first to see if it might be cheaper to stay put and take out a reverse mortgage.

Your home will continue to appreciate in value. And by staying put you will avoid paying capital gains tax completely. With taking out a reverse mortgage, you will be able to get the cash out to pay for your living expenses in retirement.

‘A reverse mortgage is a loan available to homeowners, 62 years or older that allows them to convert part of the equity in their homes in cash’.

In simple words, as an older homeowner, you will be allowed to borrow money against the value of your current home.

What are your thoughts on selling your home in today’s market? Share your ideas with us in the comments below.

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How to Retire Well on a Small Budget

by Maggie 4 Comments

an older couple in woods-retire well on a small budget

The truth is a lot of retirees will be living on a small budget. According to U.S. Census Bureau data, the median average retirement income in 2021 for retirees 65 and older is $47,357.

And the average retirement savings for people aged 55 to 64 is $375,000. For most people, these savings will decrease when they start spending them in retirement.

With not that much money in your pocket, retirement is getting more difficult than ever with the growth of inflation and just about everything getting more expensive.

Living well on a small budget in retirement can be challenging, but it is possible. There are a few things you can do to make it work.

Pay attention to your spending.

When you have to live on a small budget in retirement it is important to know where your money is going. Not many of us like to spend time tracking our expenses. But you cannot afford to slip money away on something that is not important while living on a tight budget. Every dollar should be accounted for.

Here are the biggest expenses in retirement – housing, transportation, food, and healthcare.

Take a careful look at your expenses and see how you tend to spend money each month. Divide all your expenses between fixed and variable and see where you can cut back.

Fixed expenses such as mortgage/ rent, utility bills, and car insurance are set and hard to change. However, variable expenses such as clothing, dining out, travel, and entertainment are easy to reduce.

How to Cut Expenses Before You Retire

There are many budgeting apps that make tracking your spending easier than it used to be.

Best Budgeting Apps

Reduce your housing costs.

Keeping a roof over your head is always one of your biggest budget items. But how much money you can spend on housing is critical when you have to live on a limited budget.

Luckily, we have many options to choose from:

Downsize to a smaller home or condo
Move to a cheaper location
Rent an apartment
Relocate to 55+ community
Age in Place

First, think about where to live in retirement and the monthly costs of that place including rent or mortgage, taxes, maintenance, and repairs.

Second, decide how close you want to live to your family and friends and what your other priorities such as climate, rural or urban areas, and proximity to medical facilities.

Third, if you choose to age in your home, figure out the cost of renovation for retiring in place and how much help you will need for maintaining that big house when you are older.

Choose your place to live in retirement carefully because it is your biggest budget expense.

5 Common Mistakes to Avoid When Choosing a Place for Retirement

Reduce your transportation costs.

Cars are expensive. You do not need to spend a lot of money on your car to have a happy retirement.

Typically, most retirees spend less time on the road driving than the average driver. According to stats, people over age 65 spent an average of $7,062 annually or $588.50 per month on transportation.

Owning 2 or 3 cars is often required when you live in the suburbs and work in the city or have kids. But when you retire, you do not need to have 2 or 3 cars. It stops making so much sense and hurts your budget.

If you have been a two-car family for years, it is time to downsize to one car so you can spend less money on insurance, gas, maintenance, and taxes. And if it is time to replace your old car, do not buy a new car. Consider buying something that is about 2 or 3 years old so you can pay less.

Most vehicles lose about half of their value by the time they are five years old. So, if you decide to buy a used car, a three-year-old car will cost you less in upfront expenses and maintenance.

In case you are planning to move from the suburbs to the city, you should sell all your cars and take advantage of public transportation. In this scenario, you do not need to worry about the costs of your vehicles at all. Buses, subways, and other public transportation can cost you around $526.80 per year with a senior discount. Just buy a monthly public transportation pass and enjoy car-free retirement.

Reduce your food costs.

Food is going to be your third biggest expense in retirement after housing and transportation.

On average most retirees spend around 20 percent of their income on food. According to stats, in the last 5years households run by people 65 or older spent $6,207 annually or $517.23 monthly on food. Those aged 65 to 74 spent on food $6,864 per year, and people over 75 spent $5,274. These food expenses include groceries, alcohol, and dining out.

Food costs will vary depending on your diet and habits. For example, people who prefer to buy organic produce will likely spend more money than people who do not.

If you are retiring on a small budget, you need to be creative with your food and how you eat.

Learn to cook

Eating at home more frequently will cost less than eating out. The reality is that the food you cook yourself is the cheapest food you eat. When you retire and have plenty of time there is no more excuse such as “I do not have time to cook”. After all, learning how to cook can become your new hobby.

person holding sliced veggies - retire well on a small budget

Plan meals in advance

I noticed that frequent trips for a few extra grocery items often lead to a higher food bill at the end of each month. That is why planning your meals in advance before you go grocery shopping is important.

For example, use a Monday morning to decide what dishes you want to cook at home during the coming week and additional snacks you will want to have in your pantry. After making a list, you can go grocery shopping just once for the whole week.

With current prices skyrocketing and inflation on a rise, it is getting tougher to find new ways to save on grocery shopping.

However, there are always ways to shop smart:

Shop seasonal food. Seasonal food is cheaper since there are no traveling and storage expenses involved. Purchasing seasonal produce is always cheaper than buying that same fruit or vegetable during its off-season. In addition to that, produce is fresher and tastes better in season, and is often perfectly ripe. So, take advantage of the low prices at harvest time.
Shop generic brands. The huge benefit of buying generic brands instead of name brands is saving money. Typically, generic brands are cheaper than name brands. The packaging may not be as colorful as a name-brand product, but often there is little to no difference between both products.
Shop the perimeters. Fresh foods are healthier than processed foods. In a typical grocery store layout, fresh foods such as fruits and vegetables, meat and fish, milk, eggs, and cheese are on the outside perimeter. But processed foods are typically stored in the center aisles.

Many foods in the center aisles contain preservatives that make them last longer on the shelf. If foods do not have any added preservatives, then it needs to be refrigerated to keep them fresh.

Try to avoid buying pre-cooked meals or processed foods to maintain a healthy diet and cut the costs of your groceries.

Learn to eat out for less

Cooking only for one or two seems unrewarding. However, if you are living on a tight budget, you should avoid eating out frequently. It is not that you should never eat out. But if you are retired and worried about inflation and rising food prices, reducing the number of times you go to the restaurant can help to reduce the cost of it.

There are still many ways to have the restaurant experience on a small budget:

Have your meal at home and then go for coffee and dessert.
Instead of eating out dinner, go to the same restaurant for lunch. Many restaurants have the same menu for lunch and dinner, but they mark up their prices for dinner.
Instead of eating out once a week, start eating out only once a month.
If you still want to go to an expensive restaurant, avoid ordering appetizers, alcohol, and dessert to save money on the highest price increase items.
Be selective, look for coupons or Groupons, and only go to places offering deals and discounts.
Go to happy hours at restaurants, where wine and hard liquor are less expensive, and the bar food can serve as dinner.

Check out this website for Restaurant Deals and Specials

Sign up for Groupon to receive coupons and discounts

Take care of health to reduce medical costs.

We all know that medical care is expensive, and the cost of healthcare is rising every year. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2022 may need approximately $315, 000 saved (after tax) to cover healthcare costs in retirement.

Many health issues are age-related. Our body gets weaker as we age.

There are still many retirees who spend days lying on a couch watching TV and snacking. Some people gain weight when they stop working because they are not active and eat more because they are bored. Being overweight and lack of exercise put retirees at great risk of many chronic diseases such as diabetes, stroke, and cancer.

That is why regular medical check-ups are a must.

You should visit your doctor regularly and do not skip any recommended health screenings and tests. Keep an eye on your blood pressure and cholesterol level to avoid a heart attack or stroke.

If you want to eat healthy, follow a diet rich in whole grains, vegetables, fruits, and low-fat dairy products. Additionally, do not forget to shop smart and always read food labels to avoid foods high in cholesterol and saturated fat.

Another way to keep your medical expenses down is to stay active and fit. Start with developing good habits in your new life. Create an exercise routine and follow it thoroughly.

You do not need to spend extra money on expensive personal trainers or gym membership. Walking, running, or cycling outdoor is more than enough to stay in good physical shape for years. Explore your local walking and jogging trails. Those 30 minutes a day you need to spend walking can be done in your local park.

How to Stay Fit for a Healthy Retirement

Travel and entertainment on a small budget.

One of the most exciting parts of retirement is enjoying your new lifestyle.

Portugal coast - travel on a small budget in retirement

For many retirees, travel is a big part of that lifestyle. However, traveling is expensive. It includes hotels, air tickets, restaurant meals, rental cars, entertainment, tours, and more. According to stats, the average retiree spends $11,077 per year on travel.

Travel off-season. If you want to travel on a small budget, look for travel deals or travel off-season. In retirement, it is much easier to save money on travel because you have the freedom to travel when the best deals are available.

Find cheap accommodations. Instead of paying a lot of money for the hotels, look at websites like Airbnb, VRBO, or Vacation Rentals to see what they have to offer at your destination.

Check airline prices and find the cheapest flights. Sign up for free price alerts. Be flexible on dates and be flexible with your travel destination. Fly out early because the lowest-priced flights are the first flights in the morning. Fly on the cheapest days of the week – Tuesday, Wednesday, and Saturday.

Look for senior discounts. Many museums offer free days or evenings for visitors. When you do not have to work, it is much easier to visit museums on a weekday with a smaller crowd. Also, you can ask for a senior discount at museums, concerts, parks, and other tourist attractions. With available discounts and deals, you can save a lot of money and travel for less.

If you like to travel but are concerned about spending too much money, do not travel far. Drive a few hundred miles rather than fly to your destination. You will save money on air tickets, airport food, overpriced hotels, rental cars or taxi, currency exchange, and other charges.

Find free activities. As a retiree, you can find many great things to entertain yourself for less money. There are many free local summer concerts, fall festivals, events at libraries, or social activities at a senior center.

Retirement Travel Tips for Planning a Vacation

Final Thoughts

It is good to remember that money and wealth are important, but it is not everything. Happiness is not about being able to purchase a fancy car, a big house, or indulge yourself in luxury vacations. It is small and simple things such as family, friends, and having a purpose in life that make us happy.

How do retirees manage to live on a small budget? Share your ideas in the comments below.

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How to Cut Expenses Before You Retire

by Maggie Leave a Comment

woman with laptop - cut expenses before retirement

If you are near retirement age, these tips on how to cut expenses will help you save more and give you the freedom to retire sooner.

And if you are still working, you are in a great position today to improve your life in retirement because you still earn an income. Your remaining working years could be a great time to explore some smart options of cutting expenses before you stop working.

According to the Bureau of Labor Statistics, Americans aged 65 and older spend about $48,000 per year ($4,000 per month) on average.

In retirement, most of your money will be spent on 3 big categories – housing, transportation, and medical.

According to the Bureau of Labor Statistics Consumer Expenditure Survey, for adults aged 65 and older:

Housing represents 34% of spending
Transportation represents 16% of spending
Health care represents 13% of spending

1. Reduce housing cost.

I do not have to tell you that your housing costs eat up a big chunk of your money every month. Even in retirement, the cost of housing will be your biggest financial burden.

Bringing an unpaid mortgage with you into retirement will cause a lot of financial stress each month.

The cost of homeownership for the average American household is $13,153 annually without the cost of a mortgage.

Based on my own calculations, Roman and I spend $28,400 a year on mortgage, insurance, taxes, utilities, and maintenance. It takes 25 percent out of our annual budget without the cost of home improvements and major repairs.

According to statistics, the average retiree household spends around $17,472 per year ($1,456 per month) on housing expenses including mortgage, rent, property taxes, insurance, maintenance, and repairs.

Pay off your mortgage.

You will make your retirement life a lot harder if you must continue to pay a mortgage when you are not working. Plus, you still have to spend money on property taxes, homeowner’s insurance, maintenance, and repairs.

The simple fact that you have lower housing costs means you will need less income to cover this essential expense. In addition, you will have more retirement income left for other retirement expenses.

Retirees often have to withdraw money from retirement funds to cover their mortgage payments. Unfortunately, those withdrawals typically trigger more taxes.

Look at your mortgage balance and figure out how much extra you can put toward your mortgage each month. Those extra payments can reduce your principal balance significantly.

Also, instead of sticking with the traditional monthly payments, you can start making bi-weekly mortgage payments.

Refinance your mortgage.

Another smart option to reduce your mortgage debt is to refinance it at a lower rate.

In 2020 Roman and I refinanced our mortgage with AmeriSave Mortgage Corporation at 2.5 percent. It helps us bring down our monthly payments and save up to $500 a month.

Unfortunately, not everyone can pay off a mortgage. Retiring with mortgage debt is becoming a more common scenario.

If you cannot afford to pay off your mortgage, you might consider selling your home.

Downsize your home.

Are you an empty nester? Then it might be the perfect time to reconsider your living condition.

The smart choice would be to sell your home and move to a smaller home or condo. By reducing your housing costs today, you can get extra cash into your pocket before you retire.

Look at the advantages of a smaller home or condo:

A smaller mortgage
Lower property taxes
Reduced homeowner’s insurance premiums
Fewer maintenance costs
Less yard work, especially if you get a condo

To help you get started, here are a few useful articles you may want to read:

2. Reduce transportation cost.

According to statistics, the average retiree household spends around $7,492 a year ($624 a month) on transportation.

The cost of transportation is likely to drop when you stop working. While you will not spend money on commuting anymore, not all your transportation expenses will disappear.

We all know that cars are expensive. Not only you have to pay for gas, maintenance, and repairs, but you also need to insure them. With inflation and gas prices going up every year it will make your life on a fixed income more difficult.

If you need a car, your goal should be to spend the least amount of money on a reliable car.

Here are a few options of how to reduce the costs of your vehicles before you retire:

Downsize your vehicles.

One of the best ways to reduce the cost of transportation is to downsize your vehicles.

If a large chunk of your income goes into maintaining several cars or driving luxury cars, I would suggest downsizing or choosing a different car. Going from two cars to one or downgrading to a less expensive car can help you significantly reduce the costs of gas, auto insurance, and maintenance.

According to LendingTree, the cost of a new car, including additional costs like fuel, insurance, and tires is between $23,903 (a small car) to $57,267 (a full-size car) per year.

However, if you have already paid off your car, it makes more sense to keep it as long as you can. That way, you do not need to worry about monthly car payments. Instead, you can take that money and use it to pay down any other debts or save more for retirement.

Buy a used car.

Many people choose to lease their cars because they want to have a new car every few years. Leasing works better if you are on the road for business and can deduct the lease payments.

But if you are near retirement, buying a good used car rather than a new one for the image will help you afford retirement sooner.

Most of the vehicles lose about half of their value by the time they are five years old. So, if you decide to buy a used car, a three-year-old car will cost you less in upfront expenses and maintenance.

Between paying on average $40,000 for a new car, you can save a lot of money by spending on a used car only $22,351(at the end of January 2021).

A useful post from LendingTree: Should I Buy a Used or New Car?

Use public transportation.

In case you are planning to move from the suburbs to an urban area, you should sell your cars and take advantage of public transportation.

In this scenario, you do not need to worry about the costs of your vehicles at all. Just buy a monthly public transportation pass. And when you want to go on a road trip, simply rent a car.

Use car-sharing services.

Most urban cities also have car-sharing services that give you easy and affordable access to a car for temporary needs.

Also, using services like Uber or Lyft can help you save money without the regular monthly costs associated with owning or leasing a car. With the gas prices are going up every year, you do not need to worry about that additional expense.

3. Get rid of a high-interest debt.

High-interest credit card debt can be one of the biggest burdens on your financial life in retirement.

Most of the credit cards come with high-interest rates – 18 to 20 percent.

credit card - cut credit card debt before retirement

If you carry a big balance on your credit cards, you will be stuck paying that required minimum every time your credit card bills come due.

Keep in mind, that if you bring a mortgage, high-rate credit card debt, and maybe a car loan into retirement, you will put a lot of pressure on your limited finances.

There are two most popular debt payment strategies:

The snowball strategy
The avalanche strategy

The snowball strategy – you are paying off debt from smallest balance to largest.

First, you focus on paying off the credit card with the smallest balance. Then you move on your next smallest credit card bill until all credit card debt is paid off in full.

The avalanche strategy – you organize your payments by interest rate – from high to low.

First, you pay off debt with the highest interest rate as quickly as possible (even with extra money). Then you move on to the card with the next highest interest rate.

I recommend focusing on your highest-interest debt first because the longer it takes you to pay it off, the more money you will pay towards interest.

And if you can help it, do not add any more debt to the pile while paying off old debts.

A helpful post:

How to Pay Off Debts Before Retirement

4. Review your insurance coverage.

Getting closer to retirement might be a good time to review how much you spend on insurance and how to cut that expense.

Life Insurance

First, you might look at your life insurance and decide if you still need it.

The main purpose of life insurance is to replace lost income. If your kids are grown and you no longer have any dependents who will need financial help after you die, it might be wise to drop policies. Paid-up policies can be sold.

If you have a term life policy, make sure you understand whether the payout at your death is worth the cost of the premium you are paying today.

Auto and homeowners’ Insurance

You might also look at your deductibles for your vehicles and homeowners’ insurance policies.

When you are still working, it makes sense to set your deductibles low. But low deductibles increase the amount you pay in insurance premiums. So, when you raise your deductibles, you will pay less for your vehicles and homeowners insurance premiums.

Once you retire, you might want to pay less for your insurance policies so you will have more money to cover your daily expenses.

Healthcare

In retirement many people will spend most of their money on health insurance, medical services, and drugs, as they age.

I my articles I often write about the cost of medical expenses in retirement. Because I want to remind my readers that healthcare is going to be their second biggest expense after housing, and they need to plan for it.

According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple may need around $300,000 saved (after tax) to cover healthcare costs in retirement.

Here is a helpful article you might want to read:

How to Plan for Rising Healthcare Costs

Most people will be eligible for Medicare at age 65. But if you plan to retire before age 65, you will need to find a separate plan to cover your medical expenses.

Individual health insurance is expensive and could cost more than $1,000 a month. Make sure to shop around for the best prices.

Even being eligible for Medicare brings its own set of challenges because it does not cover all medical expenses.

Medicare is not free. It does not cover premiums, deductibles, co-pays for doctor visits, dental and vision care, long-term care, personal care, and other expenses.

Long-term care insurance is the most recommended way of planning for future expenses.

Long-term care insurance will help you not be a financial burden on your family if that time comes. It will cover nursing homes, assisted living facilities, and in-home care.

After all, you do not want to leave your husband or wife with nothing because the entire nest egg was spent on taking care of you.

Final Thoughts

If you do not know what your expenses look like in retirement, it will be difficult to predict how much money you need to save for the future.

But if you can get a sense of what to expect, it will be relatively easy to cut your expenses in these categories before you retire.

Have you had more ideas on how to cut expenses before retirement?

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15 Ideas on What to Do When You Are Retired

by Maggie 4 Comments

a woman reading a book -what to do in retirement

I believe we all are excited about retirement. But have you asked yourself about what to do when you are finally retired.

We spend our lives doing things that we have to do. We go to school, we work and build our careers, we raise kids and take care of our families. We stay busy all the time. After working for three or four decades we are ready for a new life. A new life without early alarms, long commute, meetings, and stress of deadlines. Can you believe it?

When we reach our retirement, we are ready to embrace it as a new phase of life with limitless possibilities and a lot of free time. Although, we do not want to feel bored because we have nothing else to do each day and started to feel useless and lost.

Retirement is a new phase of life and if you want to enjoy this time you need to prepare for it. There are so many things you can do in retirement.

Here is a list of my 15 favorite ideas on what to do when you are retired:

1. Create a retirement bucket list.

I believe it is important to create a retirement bucket list. The bucket list will help you to see what you want to do with your life. It will keep you motivated and helps to set the goals.

Write down a list of things you always wanted to do but never could because you did not have time, energy, money, or something else.

A few ideas from my retirement bucket list:

Live in France for a year
Learn the French language
Live in Italy for a year
Write an e-book
Take dance lessons and learn how to dance salsa
Take cooking classes
Grow a vegetable garden
Design and build a lake house

2. Travel the world.

a canal in city of Venice- 15 ideas on what to do in retirement

I have a passion for travel. Traveling the world in retirement is the number one goal on my retirement bucket list. Roman and I always plan for one or two big trips a year. We like to visit different countries and enjoy the uniqueness. Our main goal is to explore countries rich in history, art, and architecture. Also, we like to try different kinds of food and take cooking classes together.

When we retire, we would like to travel as much as we can afford it depending on our budget. I believe that seeing beautiful destinations and experiencing other cultures will make our time in retirement more memorable.

3. Visit family and friends.

When you are retired, you have so much time on your hands. That is why it is a good idea to take advantage of visiting family and friends. Spending time with your family and visiting loved ones has huge benefits. It will help everyone to stay connected and keep you emotionally happy. It could be a lot of fun and bring back positive memories.

In addition, the get-together visits will help to create new experiences and memories for the future. It could be a joyful and memorable party, a small group stroll in the park, or simply a get-together family for food and games.

4. Spend more time with grandchildren.

Being a grandparent is one of our life’s greatest joy. That is why spending more time with grandkids is a great thing to do in retirement. If you live close to your grandkids you can have an important role in their lives by babysitting them more often. Also, you will help your children to save a lot of money on daycare.

When your children and grandchildren live far away, you can organize a family vacation together or try to visit them more often. You can call, or schedule some time on Skype, FaceTime, or Zoom to talk to them. Yes, seeing your grandkids on a computer screen or phone is not the same as snuggling with them or hugging. But you can enjoy your time together by seeing one another in real-time instead of just calling them.

5. Become a volunteer.

Many retirees get engaged in volunteering and found it meaningful and rewarding. Volunteering is a great way to stay busy and engaged socially with other people. There are so many ways to help others from mentoring children to assisting at the hospital or a local library. There are countless opportunities out there if you want to follow this route.

Think about what you would like to do and which organizations you would like to help. Then contact them and offer your help.

Check out volunteer jobs at the following websites:

6. Apply for a part-time job.

You are retired from work so, why would you want to apply for a part-time job. But according to the studies, 55 percent of American workers plan to continue working in retirement with 41 percent going part-time.

The reasons for working in retirement might be different. Some people will want the additional income. Sometimes having a little extra cash in your pocket help to pay for a family vacation or buy something you normally would not.

Others need to work because they cannot afford retirement. But many retirees who apply for a part-time job find the advantage of staying active and keeping their brain sharp. People enjoy working part-time because it gives them a sense of purpose and helps to stay socially connected.

15 Part-Time Jobs for Retirees

7. Find a new hobby.

When you are retired you want to spend your time doing things you love. To find out what you always wanted to do, ask yourself what I am good at and what I wanted to do.

You can use a piece of paper and pen or a Note app on your phone to write down your favorite things to do. I keep a list of things I love to do on my phone and add to it whenever a new idea pops into my head.

Here is a list of popular hobbies:

Gardening
Painting
Playing the piano or other musical instruments
Singing
Sewing
Knitting
Reading
Writing
Photography
Cooking
Woodworking
Restoring cars
Remodeling
Redecorating
Restoring furniture.

8. Remodel your home to be more retirement friendly.

It is not a secret that most of us have a deep emotional connection to our home. Whether you want to relocate to another state or retire-in-place you would want to make your home more retirement friendly. There are many ways to remodel your home. It could be a small or big project.

The most popular renovation projects recommended for retirees:

A first-floor bedroom – a great solution because climbing the stairs in the years ahead might make it difficult.

An easy entrance to home – make sure you have at least one exterior door with a flat entry rather than steps.

Bathroom remodeling – install grab bars in the shower and bathtub to be an age-friendly space. Other suggestions: install a higher toilet (19 inches high) for future balance issues; install a no-threshold shower, so you will not trip over the edge.

Kitchen remodeling – place a microwave on a counter, install a pullout pantry, lower the kitchen counters with easy access to kitchen utensils.

Eventually, you will need to get rid of the scatter rugs around the house and install a wood floor or wall to wall carpet to eliminate the hazard of tripping over them when you grow older.

Install brighter lighting for better visibility.

9. Grow a vegetable garden.

man sitting in his garden-ideas on what to do in retirement

I am not big on gardening, but I always admire a beautiful garden designed by other people. Hobbies are important to all of us, whatever age we are.

Gardening is one of the most popular hobbies in retirement. It helps you to relax, spend more time outside, stay active, and fit. Growing a vegetable garden can be your new passion and a healthy habit of eating fresh vegetables.

You can grow fruits, vegetables, and herbs. Also, you can grow cut flowers for the house. Use your imagination and design your vegetable garden to be practical, as well as interesting and inspiring. Think ahead of time which new plans to grow next year and order seeds for future sowing.

Growing your vegetables can bring enjoyment into your retirement life. You can create it as a space to entertain your friends, have a garden party, or just a place to enjoy your hobby.

10. Go back to school or take a class.

If you always wanted to learn something new, retirement is a perfect time to go back to school. Taking a class is a good way to stay mentally and socially active. When you are learning new things, you find a way to improve yourself. And we all know that “you are never too old to learn something new”.

You do not need to take purely academic or career-oriented classes. Sometimes, engaging in a cooking class, learning how to play a violin or guitar will help you to find your hidden talents.

Here are a few class’s ideas:

Writing
Art
Architecture
Interior Design
Creative writing
Pottery
Painting
Music
Cooking

11. Start cooking and host a party.

a table with dishes - cooking as a retirement hobby - 15 ideas on what to do when you are retired

Cooking is a great hobby in retirement for many reasons. Learning the basics of cooking will help to eat healthy. Also, cooking at home is more economical than eating out.

Getting started with cooking is not as difficult as every one of us has a kitchen at home. Do not worry if your kitchen is not equipped with expensive equipment, you can add it later or just use your creativity and cook with what you already have.

Most people know the basics of cooking. I love to cook. My father was an excellent cook and my sister and I learned the basics of cooking from him.

If you want to make it as a hobby you can learn from books like many people. There are videos of recipes to try, cooking channels on TV to watch and learn. Most cookbooks come with basic tips and techniques so you can learn fast.

There is a joy of cooking for friends and family. Hosting dinner or a cooking party can be a great way to get everyone involved and have fun.

How to Host a Dinner Party

12. Write a book.

For many people writing is a passion. It has become popular with people of all ages. If you like to write, then writing and self-publishing can be your favorite activity or part-time job during retirement. You can simply write for pleasure or a side income. However, selling books requires a lot of work including writing, editing, and self-publishing.

If you have good writing skills and some knowledge about content marketing, you can become a freelance writer and write articles instead of books.

Another popular way is to start a blog and write, publish, and promote your books, articles, or e-books through your website.

If you feel that writing books when you retire is your best option, then go for it! The best part is the flexibility. You can start slow, learn, restart again, and increase at any time.

How to Publish a Book in 2020

13. Join a gym or exercise daily.

Joining a gym or exercising daily will help you to stay healthy and hold off the diseases that come with old age and sitting too long in front of the TV.

Walking, exercising, running, going to the gym, taking yoga classes are all popular ways to stay fit in retirement.

Another way to stay fit and have fun is to participate in whatever sports you like. Hiking, swimming, running, fishing, canoeing, kayaking will help you to keep up with an exercise routine and stay healthy for many years.

14. Start a club.

Another thing you can do in retirement is to start a club. It could be a retirement club, a reading club, a walking club, a gardening club, etc. Talk to your friends and neighbors if it will be enough interest in whatever topic you choose. Get the word out and put flyers on the bulletin boards or even create your own website.

After that, schedule and arrange a meeting to see who might be willing to help you organize and manage the group going forward. By starting a club or special interest group you will make new friends and help others come together, share a common interest, and have fun.

How to Start a Club

15. Start a new business.

You do not want to be bored when you retire. That is why you might want to start a new business to occupy your time and share knowledge with others.

In today’s technology age you do not have to invest a lot of money to become an entrepreneur. There are so many online opportunities to earn money from the comfort of your home. Starting a new online business can be a great way to fill your day and earn extra money.

5 Great Home Business Ideas for Retirees

Final Thoughts

Retirement is a new phase of life. And if you want to enjoy this time you need to prepare for it. We all start saving money and preparing financially for our retirement years. Having finances in order is important for a comfortable retirement.

However, thinking about what you are going to do when you are retired is equally important for a happy retirement.

Have you thought about what you want to do when you are retired? Please share your thoughts in the comments below.

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What Boomer Women Need to Know About Retirement Planning

by Maggie Leave a Comment

Women-walking on the road-baby boomer women and retirement

If you are a baby boomer woman, you have probably spent most of your adult life rushing around and trying to do everything. You try to be a wife and a mother. You try to build a career, take care of your family, and pay the bills on time. Some days it feels like we do not have a life because we have to take care of so many things.

For many women in their 50s and 60s, it was normal to stop working when you started a family and had kids. Many women stayed home for years or worked part-time to help make ends meet. Because they put their family first their career opportunities were limited and resulted in lower wages, limited savings, and smaller Social Security benefits.

I have read many articles discussing why baby boomer’s generation is way behind on saving for retirement and how to help them. Baby boomer women often described as farther behind on retirement planning goals than men.

As women, we tend to let investing, financial and retirement planning responsibility fall on the men in our lives. Traditionally it has been the husband who took care of investments and financial planning, while the wife took care of the family.

“Among women aged 65 and up, the poverty rate remains nearly double that of men in the same age group. And, even though they will statistically live longer than men, many women are less likely to have planned or saved enough for retirement.” From Kiplinger, by Linda Gardner

Article from Kiplinger: Baby Boomer Women Have a Big Retirement Problem

Here are several reasons why baby boomer women need to have their own money in retirement:

Women live longer than men.

On average, we live 5 years longer than men. If we do not have enough savings to cover these years many of us will be at high risk of living in poverty in old age. Another sad truth about old age is that these years are not usually cheap or healthy. This means if we live longer than our men, we need to have more retirement resources than they have.

The truth is many women will likely take the sole responsibility of their finances at some point in their lives. Some women will remain single, but others will be divorced or widowed. If statistics show that we will outlive our husbands, it means that many of us could lose some of our husband’s pension or their Social Security benefits.

Another truth is if we will live longer there is a high chance that the financial burden of caring for our elderly parents or in-laws will fall on our shoulders.

Women earn less money than men.

Women still typically earn 25 percent less than men. The good news for women that we live in a new age where the barriers holding us back for so long seem to be declining. And yet there are still many obstacles to overcome.

Many baby boomer women did not have a steady career. Most of their lives they worked part-time or for small firms and non-profits. In many cases, it means they did not have access to an employer-sponsored retirement plan like 401(k) and they did not save enough money for retirement.

Women take time off to raise a family.

Many baby boomer women took time off to raise kids. Some of us still need to take time off to care for aging parents or a family member. It made harder for us to save as much as men. Unfortunately, a common mistake among boomer women is not to give retirement savings a high enough importance. We care for our families before we take care of ourselves.

If you are in your 50’s or 60’s and have not taken retirement planning seriously there is still time to change it.

Many women in their 50’s and 60’s feel that managing finances are not for them or men could be more qualified to handle their finances. After all, we carry so many responsibilities on our shoulders that there is no time to manage finances.

I am with you. I am making the same excuses and wish life would be easier. However, we cannot just sit here and wait for a happy retirement without taking certain steps.

How to save and invest for retirement for baby boomer women:

Get a clear picture of your financial situation.

woman writing on paper-retirement planning for baby boomer women

Start by creating a personal balance sheet. The first step is to get organized and get your financial numbers on a sheet. If your husband already has these numbers, ask him to share details with you. And if he does not have all financial information on one sheet you should prepare it together.

You do not need to go fancy and use a digital spreadsheet if you do not feel comfortable. Use old-school paper and pencil and start with ballpark numbers.

First, you want to see what you have – what do you own and what do you owe.

What are your assets?

The current value of your home
The current value of your cars (a boat?)
Value of your vacation home or rental property (if you have one)
How much money do you have in retirement accounts including 401(k), IRA, Roth IRA?
How much money do you have in a bank savings account?

What are your liabilities or debt?

Your mortgage balances
Car loan
Student Loan
Credit card debt
Other loans

Create a budget and incorporate your savings goals.

Second, if you do not have a budget, you need to create one now. Budgeting will create a framework for your finances. Thus, it will help you understand where your money is going each month. If you do not know how you spend your money there is not any leftover to save.

The main goal of creating a budget is to incorporate your savings goals.

After creating your personal balance sheet, you will get an idea of how much you have saved for retirement. If it is not enough there is still time to save more.

In our family my husband Roman takes care of budgeting, paying bills, and day-to-day money management. And I take care of retirement accounts and investment account portfolio. Every 3 months we get together and discuss our budget and our savings goals. We both like to use Excel spreadsheets for money management purpose. But for our meetings we put all numbers on the paper, so we can both see our progress.

Prepare a retirement budget and see if you have enough retirement income.

After you set up a budget it will be easier to start working on your retirement budget. The main goal of preparing a retirement budget is to see how to cover your retirement expenses while living on a fixed income.

On average you can live on 70 to 80 percent of your current income in retirement. Preparing a retirement budget will help to see if you have enough money to retire. If you are still working you have time to add to your savings, pay off debt, and change your spending habits.

Save more money.

If you are in your 50s or 60s and still working, it is not too late to save more for retirement. Part of the solution is simple – start saving more by spending less and putting extra cash into retirement accounts.

Start with employer-sponsored plan 401(k).

How much do you contribute to your 401(k) plan?
Are you making a catch-up contribution to your retirement account?

I understand that the idea of contributing a portion of your gross pay to a retirement plan makes sense, but maybe not feasible for many women. I hear you. I struggle with it myself. But with every dollar I do not spend today and contribute extra to my 401(k) I make my retirement more financially secure. My goal is to save up to 20 percent of my income.

For 2020, the IRS allows us to save $19,500 a year to a 401(k). For people age 50 and over the IRS allows an additional $6,500 a year contribution. The total contribution limit is $26,000 a year. Also, you can contribute $6,000 a year to an IRA. Additionally, for age 50 and over you can contribute an extra $1,000 a year to an IRA. The total contribution limit is $7,000 a year to an IRA.

Here is a simple example of how to improve your retirement savings. Maxing-out your 401(k) with a catch-up contribution of $6,500 a year and earning a 6 percent average annual return, will help you to accumulate around $97,300 extra in 10 years.

Learn how to invest your savings.

Learning how to invest is important for women of all ages. I read that many baby boomer women are worried about the nut and bolts of investing and making perfect investment choices. However, many studies have shown that women are confident investors when they learn how to do it.

First, you have to decide how to invest within your retirement accounts, including 401(k), IRA, and Roth IRA. It is recommended to invest in the mixture of stocks, bonds, and cash associated with your retirement goals, age, and risk tolerance. A moderate portfolio should include 60 stocks and 40 bonds. If you do not feel confident to invest in individual stocks and bonds you may find it easier to invest in mutual funds.

Second, within your retirement portfolio money should be diversified more to reduce the risk. For stocks, it is recommended to spread your money between large, mid, and small size companies in addition to the international companies and real estate. With bonds, it is recommended to spread money between long-term, mid-term, and short-term US bonds and international bonds.

Talk to a financial advisor.

people siting at cafe tables - meeting with financial advisor

As a woman, you might take care of the family budget, but your husband always took care of finances and meeting with financial advisors. For years financial planning and investing were your husband’s sole responsibility that is why you never paid enough attention to it. But you need to change it now.

You need to schedule a meeting with your financial advisor and go there with your husband. You need to discuss retirement planning, investment strategies, Social Security strategies, and more. Ask about possible ways to withdraw money from your retirement accounts to minimize taxes and penalties.

You have to be actively engaged in retirement and financial planning meetings with your advisor. Otherwise, if your husband dies you may struggle to understand your financial situation.

Final Thoughts

Many baby boomers are looking forward to a happy and secure retirement. But the process of preparing for retirement is not the same for everyone. Baby boomer women may have some unique challenges on their way to retirement. That is why retirement planning can be quite different for them.

But the time has never been more right for us as women to take control of our finances. We do not want to put our heads in the sand anymore. We want to take our financial security in our hands even it will take time to learn the nuts and bolts of retirement planning.

Do you feel prepared for retirement? Do you have your own money saved for retirement?

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Disclosure: This information is only educational. I am not providing any specific financial advice or recommendations to any of my readers.